Trustbank Annual Report 2016

Transcription

1. ANNUAL REPORT 2016 50 Trustbank
2. Content The philosophy of the bank Organization chart as at 31 December 2016 Historical summary Key indicators 52 53 54 55 Preliminary advice from the Board of Supervisory Directors Report of the Executive Board - General explanation - The macro-economic environment - The financial development of the bank - The operational management Financial statements 2016 - Balans sheet as at 31 december 2016 (before profit appropriation) - Profit and loss acount over 2016 - Cash flow statement over 2016 - Explanatory notes to the 2016 financial statements - Explanatory notes to the balance sheet as at 31 December 2016 - Explanatory notes to the profit and loss account over 2016 56 58 58 59 62 66 69 70 72 73 74 78 87 Other data 93 Independent auditor report 94 Annual Report 2016 51
3. The philosophy of the bank After almost three decades of dedicated and loyal service to the Surinamese community , the Trustbank has changed its strategic policy. In 2015, the starting point was given for the conversion of a conventional secondary bank to an Islamic bank. Its strategic partner in this is the Islamic Corporation for the Development of the Private Sector (ICD), which is a workforce of the Islamic Development Bank (ISDB). The year 2016 is therefore also characterized as the year of kick-starting the implementation. The new strategic policy requires some change of the current banking business model of the Trustbank, transitioning from a conventional banking principle into a fully Islamic banking principle. In the last decade Islamic banking has been increasing in popularity worldwide, not only in the Middle East, but also in Asia and Europe, especially in England. After this transition, the new bank, Trustbank Amanah, will be the first Islamic bank in the Western Hemisphere. As a result of such transition, the Trustbank will be able to deepen its vision, namely to enhance economic development through the use of relatively low funding, broad knowledge and expertise. This development will stimulate the growth of micro, small and medium-sized entrepreneurs, promote social development, alleviate poverty and ultimately promote the financial well-being of the Surinamese community. The aim is to open the first branch of Trustbank Amanah in the second half of 2017. The Trustbank and the Monetary Authorities are currently working on some formalities, after which this new form of banking will be officially offered to the entire Surinamese society. 52 Trustbank Vision Promoting sustainable growth through ethical banking Mission The bank with heart for the financial well-being of its customers Core values Providing care Sustainable development Accessible Transparent Innovative
4. Organization chart as of 31 december 2016 Supervisory Board Chief Executive Officer (CEO) Human Resources & General Affairs Internal Audit Department Legal & Compliance Enterprisewide Risk Management Secretary Chief Commercial Officer (CCO) (vacant) Chief Financial Officer (CFO) Customer Care Loans Treasury Collection Marketing Accounting & Reporting Trustbank Affiliates Micro Credit Unit IT Trustbank North Trustbank Nickerie Annual Report 2016 53
5. Historical Summary Balans sheet as at 31 december x SRD 1000 2016 2015 2014 2013 SRD SRD SRD SRD 21 ,638 32,993 12,516 23,515 ASSETS Cash resources 65,737 42,352 23,916 23,631 161,352 139,927 122,003 104,525 261 229 308 352 Treasury bills 14,761 2,451 9,644 5,328 Investments 1,594 438 6,101 5,875 - 29 58 87 4,095 3,850 - 62 21 438 *) 464 490 Loans and advances to credit institutions Loans and advances to customers Securities Intangible fixed assets Operating assets Other current assets Prepayments and accrued income 7,637 741 24,249 4007 *) 297,970 222,864 179,267 167,674 253,433 179,056 *) 148,092 140,516 LIABILITIES Amounts owed to customers 358 328 317 - 20,583 21,487 12,978 12,409 Provision for general banking risks - 600 600 600 Provision for deferred tax liabilities 3,315 2,759 1,959 1,959 20,281 18,634 15,321 12,190 297,970 222,864 179,267 167,674 Other liabilities Accrued expenses and deferred income Equity capital *) Adjusted for comparative purposes 54 Trustbank
6. Profit and loss account x SRD 1000 2016 2015 2014 2013 SRD SRD SRD SRD 15 ,730 14,863 12,911 10,331 INCOME Interest income Other income 7,545 4,893 4,582 4,229 Total income 23,275 19,756 17,493 14,560 14,395 9,439 7,581 7,190 282 327 321,1 237 3,459 2,719 2,691 450 18,136 12,485 10,593 7,877 EXPENSES Personnel and other administrative expenses Depreciations Value adjustments to receivables and provisions for balance sheet liabilities Total expenses 5,139 7,271 6,900 6,683 Income tax -1,821 -2,649 -2,500 -2,453 Net profit 3,318 4,622 4,400 4,230 31-12-2016 31-12-2015 SRD SRD Invested funds (loans and advances to customers) 167,568 146,761 Deposits and customer accounts (amounts awed by customers) 253,433 185,558 Deposits and customer accounts (amounts owed to customers) % % Invested funds/deposits and customer accounts 66 79 Personnel expenses/total income 25 23 Operating expenses/total income 78 63 Operating result/total income 22 37 Pre-tax result/total income 22 37 7 8 21 21 Pre-tax profit Key indicators x SRD 1000 Equity capital/total assets (capital ratio) Interest income/average loans and advances to customers 7 7 Net interest margin (interest income/average loans and advances to customers) 10 11 Net result/average equity capital 17 27 1 2 62 48 Interest expenses/average amounts owed to customers Net result/average total assets Efficiency ratio (Personnel and other administrative expenses/total income) Annual Report 2016 55
7. Preliminary advice from the supervisory board Consultation and decision-making The economic situation in the country has had a slight impact on the operational management of the Trustbank . This is reflected in the bank's operational result, which reflects a decline. The negative development was mainly due to an increase in credit risks as a result of continued pressure on the Non-Performing Ratio and a decrease in loans, as well as worsening OCP positions because of the high exchange rate movements. The Supervisory Board has had frequent consultations with the management on this issue. These meetings regularly discussed the financial performance, performance indicators, policy goals and the strategic plans. Partly due to this joint effort and active monitoring of the Management, the Executive Board and the Board of Supervisory Directors, the Trustbank achieved a positive operating result for the 2016 financial year. The initiated process of conversion into a full Islamic bank, launched in the first quarter of 2015, was continued in 2016. To this end, policy decisions have been taken: 1. Reformulating the governance structure with the introduction of new features such as Relationship Managers, Business Analysts, and the set-up of the Enterprise Risk Department and the Shari'ah Supervisory Board; 2. Conversion into an Islamic Banking IT System; 3. The conversion of existing banking products and services into Islamic banking products; 4. The amendment of the articles of association, in particular, the amendment of the objective, name change and introduction of the body of Shari'ah Supervisory Board. The Management, the Executive Board and the Board of Supervisory Board have drafted the Business Plan of Trustbank Amanah in close cooperation. The Business Plan has included aspects such as ambitions, strategy, the new Islamic banking products and services, Organization Structure and HR, Internal Audit Department, Accounting, Risk Management and the Financial Plan. Simultaneous to the conversion process, negotiations will be conducted with the ICD regarding participation in the Trustbank's share capital. Through the participation of the ICD, Trustbank will be institutionally strengthened with capital and expertise and serve as a financial hub for the region. The Board of Supervisory Directors and the Executive Board recognize that the current accommodations do not meet the current developments within the Trustbank. Both in the pre- and post-conversion phase with a new business model with new features and additional market care for SMEs and Corporate customers, expansion of office space is indispensable. In this context, a new business building has been set up in Paramaribo North and a new bank building will be set up in the centre. To the General Meeting of Shareholders In pursuance of article 19 of the Articles of Association we hereby submit the 2016 financial statements. We request you to grant your discharge based on these financial statements together with the auditor’s report of Tjong A Hung Accountants. 56 Trustbank
8. The pre-tax operating result amounted to SRD 5 ,138,767. After deduction of SRD 1,820,733 in income tax, the net profit amounts to SRD 3,318,034. With the adoption of the financial statements, the annual profit will be allocated as follows: Cash dividend: SRD SRD 995,410 Addition to general reserve: SRD SRD 2,322,624 Acknowledgments We express our appreciation and gratitude for the manner in which the Executive Board, Management, and the employees devoted their efforts to the company during the 2016 financial year. Paramaribo, April 28 2017 The Supervisory Board S. Karijokromo-Ardjosoediro, LL.M. Chair S. Kertoidjojo, LL.M. Member Drs. R. Tjin Wong Joe Member F. M.S. Ishaq, LL.M. Member Ing. H. Abas Member The Supervisory Board. From left to right: dhr. H. Abas, dhr. mr. F.M.S. Ishaak, mevr. mr. S. Ardjosoediro, dhr. mr. S. Kertoidjojo, dhr. drs. R.A. Tjin Wong Joe Annual Report 2016 57
9. Report of the Executive Board The Executive Board . mr. M.S. Badjoeri en drs. E. Kidjo 1. General Explanation The Trustbank has developed satisfactorily in 2016, despite the historic shrinkage of the Surinamese economy and a strong overall drop in productivity. The main contribution to this decline was the public sector, but also the activities in the wholesale and retail sector strongly declined. Due to the large size of the public sector in Suriname, coupled with structural and increasing budget deficits, a sharp decline in the public sector was inevitable in the long run. Despite these negative circumstances in the macroeconomic environment in which we have to operate as a bank, we may state that the balance sheet total rose 34 percent over the past year, which has exceeded performance over the past few years (rising 7 percent in 2014 and 24 percent in 2015). On the credit and deposit market, the bank was faced with continuing depreciations of the Surinamese currency, partly due to insufficient foreign exchange reserves of the Central Bank and a resulting flexible exchange rate since mid 2016. The operating result after deduction of taxes decreased by 28 percent to SRD 3,3 million compared with 2015. This was mainly the result of the increased management and personnel expenses of the bank. Personnel expenses increased by SRD 1,2 million, mainly due to inflation adjustments and a changed salary structure as of January 2016. Total management expenses increased by SRD 3,7 million, mainly resulting from the conversion process. The increased management expenses are also due to the deteriorated exchange rate ratio. The total income increased by 18 percent, while expenses increased by 45 percent. As a result of the increase in management expenses compared to total income, the Efficiency Ratio dropped by 14 percentage points to 62 percent. The performance indicators for liquidity, profitability and solvency remained within a sound level. The non-performing loan ratio rose to 6.7 percent, and therefore exceeded the standard of 5 percent as set by the Central Bank. 58 Trustbank
10. 2 . The Macroeconomic environment Global economic rearrangement Global growth in 2016 remained modest at 2.4 percent, in line with expectations outlined by international multilateral institutions. Although growth in developed economies remained weak at 1.6 percent, growth in emerging markets accelerated to an average of 3.2 percent in 2016. For the near future, the outlook is influenced by the shift of global trends. Firstly, due to the low level of commodity prices, which are expected to improve slightly in the near future after a slight recovery in the past year. Secondly, through the recovery of capital flows to emerging market economies following a sharp decline in the second half of 2015, mainly due to low interest rates in developed economies. In the third place, by a slower recovery of the US economy and a new downside risk of global growth prospects materialized in June by the Brexit vote in the United Kingdom before leaving the European Union. Comments from the market on the Brexit vote are generally resigned. In the medium term, the outlook remains moderate, due to ongoing global economic rearrangements. Latin America and the Caribbean The average growth of the region has been behind the growth rate of global activity since 2013. On average, GDP in Latin America grew by 0.3 percent and 1.9 percent in the Caribbean, although there is considerable variation within the region. The short-term regional outlook is due to the following factors: • A weaker than expected US recovery has a direct impact on its trading partners, especially Mexico and Central America. • The slight recovery of previously sharply declining commodity prices has provided some breathing space for commodity producers who were facing balance of payments shocks. • Domestic developments remain dominating the prospects for a number of important countries, such as Argentina, Brazil and Venezuela. As a result of the shift in short-term trends, most of the currency types of the region have recovered since mid 2016, especially those with a flexible exchange rate regime. As expected, this flexibility helped mitigate the impact on external accounts compared to countries with rigid currency regimes. Downward risks continue to dominate; on the external side, due to weaker than expected US recovery and moderate growth in world trade and on the internal side, due to increasing political and social turmoil coupled with an overly inward economic policy. Suriname In 2016 the Surinamese economy ended in a deep recession, resulting in a historical economic downturn of -9 percent, after real GDP in 2000 already declined by -2 percent. Declining commodity prices since 2014 represent a challenge for Suriname to maintain economic growth. Declining revenues from the export of commodities then put pressure on the government budget. In the first half of 2016, total revenue fell by 14 percent compared with the first half of 2015 and 28 percent compared to 2014. At the same time, total expenses declined by 6 percent over the first six months of 2016 compared with the first half of 2015. The cash-based deficit in 2016 is estimated at -6 percent of GDP, although the budget was based on a larger estimate of -7.7 percent of the GDP. Annual Report 2016 59
11. Assistance from multilateral institutions The continuing poor economic performance , which resulted in double-digit funding shortages in 2015, forced the government into a spending cuts program. Therefore, in order to keep the spending in check, in 2016, subsidies for electricity and water were reduced and fuel taxes increased. The Government of Suriname also called for assistance from the International Monetary Fund within a Stand-by Arrangement (SBA). Within the SBA framework, Suriname was eligible for loans from the Inter-American Development Bank and the Caribbean Development Bank, respectively, USD 70 million and USD 50 million. In the last quarter of 2016, the Islamic Development Bank was also called upon to finance necessary infrastructure and energy projects between 2016 and 2018. The Central Bank's reserve for SRD, USD and EUR accounts of the general banking system remained constant in 2016 at 35 percent for the SRD and 50 percent for both the USD and EUR. The Ministry of Finance further introduced treasury bill auctions to initiate open market operations to enhance monetary policy and to provide for a new source of domestic funding. Finally, average lending and deposit extensions increased marginally over the previous year. Floating exchange rates In the last quarter of 2015, the pressure on the Surinamese dollar increased sharply, especially through depleted foreign exchange reserves, which forced the Central Bank to devaluate by 20 percent to SRD 4,04 per USD. Due to the persistent scarcity of foreign currency, March 2016 began with so-called currency auctions in order to somewhat ease the pressure on exchange rates. The limited success of this measure forced the Central Bank in May to move to a free floating exchange rate system. The exchange rate then deteriorated steadily and rose to SRD 7,50 per US dollar by the end of 2016. Due to the reduced demand for import goods, the trade balance changed from a shortage to a slight surplus. On a cash basis, the Current Account ended at the end of 2016 at a loss of approximately 8.5 percent of the GDP, compared to 19.6 percent in 2015. International reserves by May 2016 guaranteed an import coverage of only 0.9 months. With the support of the IMF, these reserves were pushed to USD 400 million in the last quarter over 2016, enough for the critical three (3) months import coverage. Tabel 2.1 Macro-economic key indicators (percentagewise movements, unless mentioned otherwise) Real Domestic Product 2013 2014 2015 2016 3 1 -2 -9 2 4 25 55 Money Supply 11 5 8 33 Loans to Private Sector 19 9 8 1 -Lending operations 37 33 39 30 -Deposits 53 53 58 68 Public finance deficit (in % of GDP) (6) (5) (8) (10) National Debt (in % of GDP) 37 42 50 60 4 3 2 3 Consumer Price Index Dollarization (in % of total) International Reserves (in months of imports) Source: Central Bank of Suriname, International Monetary Fund, provisional figures and own estimates 60 Trustbank
12. Prospects encouraging In October 2016 the Newmont Suriname gold mine became operational . Gold exports from this mine, which is partly owned by the Staatolie Maatschappij Suriname N.V. and the Government of Suriname, are expected to contribute to some economic recovery starting in 2017. In the last 3 months of 2016 about 3 tons of gold were exported by Newmont. Monthly production is estimated at 1,000 kilograms of gold. The Newmont-Merian mine has a proven capacity of 5.1 million ounces, or nearly 160,000 kilos of gold. This multi-national company is expected to pay more than USD 19 million to the State on payroll tax and royalties in 2017. By the end of 2016, there were about 1,100 employees, of whom 20 percent came from the local Maroon community. Despite these promising prospects in the gold sector, overall economic performance in 2017 is expected to be weak. Annual Report 2016 61
13. 3 . De financial development of the bank Coping with the deteriorated macroeconomic environment During the fiscal year, the balance grew by 34 percent to SRD 298 million, compared to 24 percent balance sheet growth in 2015 (chart 3.1). Although changes in exchange rates are partly the root cause of this significant growth, successful accountmanagement has played an equally important role in the deposit market. In addition, the liquidity position was strengthened further, due to a significant increase in investment loans and fixed-term deposits. Growth was also characterized by a sharp rise in inflation (CPI inflation rose by 55 percent). In combination with the worsening of the exchange rates, a sharp upward pressure on interest rates was exercised. The average balances of our funds increased by 42 percent to an amount of SRD 253 million at the end of 2016. The total amount of savings accounts ended at more than SRD 125 million, while term deposits increased to SRD 127 million by the end of 2016, from SRD 93 million and 86 million respectively in 2015 (Chart 3.2). This satisfactory result is indicative of the trust of the customer in our bank. The result of financial transactions includes exchange rate differences arising from the conversion of monetary assets and liabilities in foreign currency. Interest income increased by 6 percent, or SRD 867,634. This is due to an increase in interest income of SRD 3,954,370 resulting from an increase in the loan portfolio, compared to a sharp increase in interest expenses by increasing funds attracted to the end of December 2016. The exchange rate in foreign currency of both the USD and the Euro has also contributed to the strong increase in both interest income and interest expenses. It is worth mentioning that interest rates in 2016 have also been adjusted. Chart 3.1: Balance sheet total of the Trustbank Chart 3.2: The deposits and customer accounts x SRD 1.000 x SRD 1.000 297,970 300,000 150,000 127,692 250,000 222,864 200,000 92,940 179,267 90,000 167,674 150,000 83,988 79,470 71,141 135,158 75,358 68,532 72,734 63,048 60,000 105,573 100,000 45,841 30,000 50,000 0 2011 2012 2013 2014 2015 2016 0 27,639 2011 2012 2013 2014 Term deposits 100,000 62 Trustbank 90,000 80,000 125,741 120,000 2015 2016 Savings accounts 200,000 87,360 161,352
14. On the credit side there was a remarkable shift from car financing and mortgage loans to investment loans . An important reason behind this shift is risk reduction of the credit portfolio. The average interest rate for car finance rose by 3 percentage points to 15 percent, while interest rates on investment loans remained relatively low at 14 percent, while interest rates for mortgages were 21 percent on average. The balance sheet value of interest certificates increased by 48 percent to SRD 127 million, making this share in the entrusted funds now 50 percent. Formal short-term savings yielded interest rates of 6 percent, 2 percent and 2 percent per annum for SRD, USD and EUR respectively. The maturity of the interest certificates was between 1 and 5 years, while interest rates varied between 8.5 percent and 13 percent for SRD, 4 percent and 6.25 percent for the USD and 2 percent and 4 percent for the EURO. Active management focusing on better results During the reporting year the policy was aimed at actively managing temporary surplus cash resources. The result was an increase in interest income by 4 percent to SRD 31 million. Especially additional 297,970 300,000 150,000 income from personal loans and hire-purchase financing, as well as from increased investments in Treasury bonds, contributed to this positive result. On the other hand, efforts to control the funding cost 127,692 125,741 250,000 as well as emphasis on attracting relatively cheap money led to a less sharp rise in interest expenses 120,000 222,864 and this by 25 percent to SRD 15,6 million. Hence, on balance the interest margin rose by SRD 868 200,000 thousand or 6 percent to SRD 15,7 million, or 68 percent of the total income (Chart 3.5). 179,267 90,000 167,674 150,000 79,470 71,141 135,158 75,358 68,532 72,734 63,048 60,000 105,573 100,000 45,841 30,000 50,000 0 92,940 83,988 2011 2012 2013 2014 2015 2016 0 27,639 2011 2012 2013 2014 2015 2016 Chart 3.3: Lending deposits Savings accounts Chart 3.4: MovementsTerm credit portfolio x SRD 1.000 x SRD 1.000 100,000 200,000 90,000 87,360 161,352 80,000 139,927 64,800 122,003 59,220 60,000 104,525 50,000 100,000 45,734 39,329 40,000 30,000 150,000 69,880 70,000 79,287 59,300 28,114 50,000 20,000 10,000 0 2010 2011 2012 2013 2014 2015 2016 0 2011 2012 2013 2014 2015 2016 5,000 35,000 31,287 30,000 27,332 4,623 4,500 4,000 4,229 3,702 4,369 Annual Report 2016 63
15. 297 ,970 300,000 150,000 127,692 250,000 125,741 120,000 222,864 The remaining income sources increased by 54 percent to SRD 7,5 million, mainly by providing coherent 200,000 additional services to our customers. The result of securities holdings increased by SRD 168 thousand, 92,940 179,267 90,000 167,674 83,988 while the result of financial transactions increased by 178 percent to SRD 2,1 million. On balance, total 79,470 75,358 150,000 72,734 71,141 68,532 to 11 percent in the income increased 135,158by 18 percent to SRD 23,3 million, after having already amounting 63,048 previous105,573 year. 60,000 100,000 45,841 On the liability side of the profit and loss account, total management 27,639 expenses increased by 53 percent 30,000 50,000 to SRD 14,4 million, mainly due to an increase in other (non-personnel) management costs with SRD 3,7 million. This increase is the result of the necessary costs due to the cooperation of the Trustbank 0 0 2012 2013 2014 increased 2015 2016 and the 2011 ICD. Personnel expenses by SRD 1,2 million2011 in 2016 or 262013 percent. increase in 2012 2014The 2015 2016 personnel expenses is due to inflation correction as at May 2016. As a result,Term total expenses increased deposits Savings accounts by 45 percent to SRD 18,1 million. The outlined development of income and expenses resulted in a levelling off, of operating income 100,000 200,000 before tax by 29 percent to SRD 5,1 million. The net result after deduction of taxes amounted to 90,000 87,360 SRD 3,3 million, a decrease of SRD 1,3 million compared with 2015. 161,352 80,000 150,000 69,880 This also led to a substantial improvement in the efficiency ratio by 14 percentage points to139,927 62 percent 70,000 64,800 122,003 59,220 the ratio between personnel and other operating expenses (chart 3.7). This ratio reflects (excluding 60,000 104,525 credit risk provisions) and total income. The improvement of this ratio is indicative of the increased 50,000 100,000 45,734 operational management efficiency in the reporting year. 39,329 40,000 30,000 79,287 59,300 28,114 50,000 20,000 10,000 0 2010 2011 2012 2013 2014 2015 2016 2012 2013 2014 Chart 3.6: Movements in Results x SRD 1.000 x SRD 1.000 30,000 3,702 3,318 3,000 19,514 15,532 15,556 12,836 10,324 9,183 2,500 2,000 12,470 10,000 4,369 3,500 23,235 20,000 1,500 6,847 0 4,229 3,626 25,000 5,000 2016 4,623 4,500 4,000 27,332 15,000 2015 5,000 31,287 1,000 5,295 500 2011 2012 2013 2014 Interest Income Trustbank 2011 Chart 3.5: Interest income versus Interest expenses 35,000 64 0 2015 2016 Interest expense 0 2011 2012 2013 2014 2015 2016 Net Profit
16. 100 ,000 200,000 90,000 87,360 161,352 80,000 150,000 69,880 70,000 139,927 64,800 122,003 59,220 60,000 104,525 50,000 100,000 45,734 39,329 40,000 79,287 However, profitability on average equity decreased by 10 percentage points to 17 percent, due to the fact 30,000 59,300 28,114 that the growth in total assets exceeded the increase 50,000in profit after tax. Profitability on total assets 20,000 (before profit appropriation) decreased to 1 percent (chart 3.8). 10,000 Due to the faster growth in the balance sheet total relative to the operating result, the bank's solvency 0 0 2010 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 decreased slightly, but remained within the current standards. The capital ratio, which reflects the ratio between equity (before profit appropriation) and balance sheet total, decreased by 1 percentage point to 7 percent. This is the result of equity growth by SRD 1,6 million or 9 percent to SRD 20 million, while the balance sheet total, as previously stated, increased by SRD 75 million or 34 percent to SRD 298 million. The 35,000 BIS ratio, defined as the ratio between equity 5,000 and the sum of risk-weighted assets, increased marginally by 0.3 percentage point to 10.3%. 31,287 30,000 3,626 25,000 15,532 15,556 12,836 3,318 9,183 2,500 2,000 12,470 10,324 1,500 6,847 0 3,702 3,000 19,514 10,000 4,369 3,500 23,235 20,000 5,000 4,229 4,000 27,332 15,000 4,623 4,500 1,000 5,295 500 2011 2012 2013 2014 Interest Income 2015 2016 0 2011 2012 % 50 45 70 62 60 2016 Chart 3.8: Trend in profitability % 40 43 40 36 35 32 50 44 2015 Net Profit 80 45 2014 Interest expense Chart 3.7: Movements in Efficiency ratio (%) 50 2013 48 30 43 27 25 40 20 30 17 15 20 10 10 0 5 2011 2012 2013 2014 2015 2016 0 3 2011 3 2012 3 2013 3 2014 ROE 2 2015 1 2016 ROA Annual Report 2016 65
17. 4 . The Operational Management Highlights AMANAH project In 2015, the official start signal was given for the conversion process. In 2016, the Trustbank took up the preliminary work in full swing. The aim is to open the first branch of Trustbank Amanah in the 2nd half of 2017. The Trustbank and the Monetary Authorities are currently working on formalities under which this new form of banking will be officially offered to the entire Surinamese society. In February, employees followed product trainings provided by the ICD. In the training, emphasis was placed on the new Islamic banking products that Trustbank Amanah will offer. At the invitation of the IsDB, the Executive Board of the Trustbank attended the 41st Annual Meeting of the Islamic Development Bank (ISDB) in Jakarta from 15 to 19 May. At this annual meeting, the CEO had the opportunity to publicly present the Trustbank Amanah model and to conduct further discussions to achieve the goals as set. For the selection of an Islamic Banking Information System (IBIS), a (pre-)selection procedure was kick-started in May 2016. Following this, a request for proposal was sent to selected IT providers on September 01. Three selected IT providers presented their proposal to the Trustbank from October 10-13, after which Path Solution with its iMal banking system was selected as the winning IT vendor. Implementation phase starts as soon as the contract has been signed. In June, a tendering process for legal services was conducted. A selected number of law firms was invited to make a proposal. The engagement has been awarded to Law Firm Kraag-Brandon. The new Plutostraat branch was made operational as a back office on November 7, 2016. Within the foreseeable future, the new establishment will also be available to the public. Accounting & reporting In 2015, Trustbank decided to be transformed into an Islamic bank. This implies that the organization, products and services and reporting are based on the Shari'ah principles. As part of the transformation and internationalization of the bank, it intends to change its financial reporting from Generally Accepted Accounting Principles (GAAP) to International Financial Reporting Standards (IFRS). The IFRS implementation has consequences for all (financial) processes, including the planning & audit cycle. At the end of 2016, we started gaining insight into the impact of a conversion from GAAP to IFRS on the balance sheet and income statement. For this purpose, a gap analysis is required, among other things, of the major differences in accounting principles. Taking into account the execution of the conversion process, the implementation will be done on a phased basis. Human Resources In 2016 the activities within the Human Resources department focused mainly on the conversion of Trustbank to Trustbank Amanah, in the course of which the development and need of existing human resources and the establishment and organization of a new organization were important. 66 Trustbank
18. The main activities that took place were : • Preparing and supporting the various work visits of representatives of the ICD. • Co-facilitating employees to participate in various training courses on Islamic Banking & Products. • Developing the organizational structure of the new bank, Trustbank Amanah. • Assisting the Project Management Office and associated work-streams within the conversion process, with as key milestone obtaining the Memorandum of Understanding from the Central Bank of Suriname for the transformation into an Islamic bank. Personnel As at 31 December 2016 the number of personnel members amounted 22 male and 40 female employees totalling 62. Five (5) employees left the organization, while 9 employees strengthened the organization in 2016. The recruitment and selection focuses mainly on candidates with the necessary skills and competences to further support the conversion process. In addition, the Trustbank has been able to accommodate trainees and holiday jobbers in 2016. In 2016 employees were graded in the new salary structure of the Trustbank, taking into account the competences of the employees. The opening hours of the bank were advanced by one hour on Saturday, after which the rotation system for the Saturday was introduced to the employees. Furthermore, the holiday entitlements have been increased to a minimum of 14 days and up to 24 days, depending on the years of service. The annual Family Day and End of the Year Party were also organized for the employees in the past year. Communication and team building sessions were also held throughout the personnel. Managers of Trustbank Annual Report 2016 67
19. Training The following training and seminars were followed or attended by the employees of the Trustbank , including Managers and Executive Board: • Islamic Contracts • IT Core Banking Systems • Performance Management System • Project Investment Management Application • Islamic Modes of Finance • Treasury • IFRS • English conversation Skills • Marketing Information Event • FIBA/AMLCA Certification Training • Finance & Tax Management • National Rice Conference • Fair remuneration • Asset Liquidity Management Risk & Compliance ERM awareness sessions were held to raise awareness and urgency and initiate discussion internally. A modern ERM framework was designed to effectively manage and monitor specific risks related to banking. FATCA In February 2016, the Legal & Compliance Officer participated in a certified compliance training at the FIBA, thereby obtaining the title Anti-Money Laundering Certified Associate (AMLCA). In August, the department was strengthened by a senior Legal Officer. AML / CFT Awareness sessions were conducted for the employees. Trustbank Micro Credits Program In April, the Trustbank participated in the MADE IN SU fair in KKF (Chamber of Commerce and Industry) with the aim to further disclose the possibilities of the Micro Credit Plan (MKP – Dutch abbreviation). The MKP improves the income of micro (small) entrepreneurs, increases employment and improves access to credits at the Microfinance Institution (MFI). Acknowledgements The Executive Board thanks the Board of Supervisory Directors for its support and the employees for their commitment and contribution to achieving the positive operating result. We also express our gratitude to our customers for the trust placed in the bank. Finatrust, the Trustbank N.V. Paramaribo, 27 april 2017 68 Trustbank Mrs. M.S. Badjoeri, LL.M. CEO Mr. drs. E. Kidjo CFO
20. FINANCIAL STATEMENTS 2016 Annual Report 2016 69